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EU Warns About the Impact of COVID-19 on Non-Regulated Crypto Investments

Richard Marley
March 18, 2021
3 minutes read
214

European Union’s financial regulatory agency, the European Securities and Markets Authority (ESMA) has analyzed the effects of COVID-19 on the crypto investments and the risks it has developed for investing in non-regulated crypto-assets.

ESMA is the EU’s independent financial authority and it has warned the crypto industry, after analyzing the financial market, about the high-risks that entails the investment in non-regulated crypto assets.

The regulatory body has published the latest report on Wednesday, which highlights the impact of COVID-19 on the financial market and how it has increased the risks regarding the investment in non-regulated crypto-assets more than usual.

According to the authorities, the crypto industry has experienced a huge spike in the value and trading volumes in the latter half of 2020 along with Bitcoin reaching its highest value. ESMA suggests that this spike was fuelled by the positive flow of news in the crypto industry. PayPal’s move has also played a role in this by introducing the crypto buy and sell option on its platform along with the growing attention on DeFi ( decentralized Finance).

Uh oh, is the EU about to make using cryptocurrency more difficult? The ESMA is raising the alarm on “non-regulated crypto-assets.” https://t.co/2vwlefKq2k

— Cointelegraph (@Cointelegraph) March 18, 2021

ESMA comments on the growth of the crypto industry, “it is also fuelled by strong investor demand and search for yield amid unprecedented global fiscal and monetary stimulus.” ESMA also warns about the risks, “Amid the increasing volumes and demand, crypto assets are highly volatile and bear high risks for investors. Prices of non-regulated crypto assets at all-time highs imply significant risks for investors.”

The new report by ESMA also notes the growth of DeFi sector and highlights its benefits like disintermediation, its availability 24/7, resistance to censorship along the risks entailing operational resilience, governance, and scalability. However, ESMA will continue to watch the growth in DeFi industry as it might bring challenges regarding the regulations and supervision.

The regulatory agency has played a key role in monitoring financial regulation in the European Union. In February, France’s top financial regulator’s chairman, Autorite des Marches Financiers, proposed to make European Securities and Markets Authority (ESMA) the chief regulatory authority for the crypto industry in the European Union region.

Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

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UK Publishes First National Risk Assessment of Proliferation Financing
The UK is at a high risk of proliferation financing for Korea and Iran, while UK financial institutions remain the main target.

The UK has published its first national risk assessment (NRA) of proliferation financing risks, following the collection of views and evidence from the government, private sector, and academic and research partners, highlighting the proliferation financing risks facing the UK.

The UK is one of the first jurisdictions to carry out such an assessment.

While the UK currently has robust practices in place for combating proliferation financing activities, malign actors involved in proliferation financing seek to exploit the UK’s stability in the global economy and international financial system. The act involves the use of funds for facilitating chemical, biological, radiological, and nuclear (CBRN) programmes which pose a threat to the UK’s national security objectives and threaten international peace.

The key findings of the proliferation financing NRA have been identified as the following:

The UK’s financial sector is at high risk from proliferation actors. The UK’s financial services industry, particularly the banking and insurance sectors, is especially at risk

The Democratic People’s Republic of Korea (DPRK) and Iran are the most significant proliferation financing actors at the state level

The private sector has limited awareness regarding proliferation financing compared to other risks, such as money laundering and terrorist financing

The notice issued by the UK government states that “a lack of awareness of proliferation financing in parts of the UK economy can lead to a lack of understanding of how certain industrial products, for example, may be manipulated for hostile use or for use in a CBRN programme”.

Despite the above-mentioned threats, the NRA highlights the robust counter-proliferation legal framework in place in the UK that protects the country from proliferation financing.

The UK’s autonomous financial sanctions regimes targeting CBRN proliferation, as well as other regulations in the UK, including UN sanctions regimes, export control regimes, and other tools available to the UK Government, limit opportunities for proliferating actors to exploit the UK to obtain financing for CBRN capabilities.

The full assessment can be viewed here.

Suggested Read: FATF Issues New Guidance on Mitigating Proliferation Financing Risk

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EU Warns About the Impact of COVID-19 on Non-Regulated Crypto Investments

Regulatory Approach to Merchant Onboarding

FATF’s Recommendations

6AMLD in the EU

Corporate Transparency Act in the US

How Shufti Pro is Helping Businesses Onboard Legitimate Merchants

In a Nutshell…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

EU Warns About the Impact of COVID-19 on Non-Regulated Crypto Investments

What is Merchant Verification?

Regulatory Approach to Merchant Onboarding

FATF’s Recommendations

6AMLD in the EU

Corporate Transparency Act in the US

How Shufti Pro is Helping Businesses Onboard Legitimate Merchants

In a Nutshell…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.